Executive Summary

On March 17, 2026, Postmaster General David Steiner testified before the House Subcommittee on Government Operations and delivered an alarming update: The Postal Service would run out of cash within twelve months barring significant Congressional action. Less than three months later, Congress has been provided new insights into the Postal Service’s circumstances and additional encouragement to unequivocally address the future of government mail and package delivery in the United States.

On June 4, 2026, Postal Regulatory Commission (PRC) Vice Chairman Robert G. Taub testified before the Subcommittee on behalf of the full Commission. His testimony was a clear-eyed account of the Postal Service’s financial condition, how it got there, and what must happen next. And while Vice Chairman Taub did not fully agree with PMG Steiner’s prognosis or prescription, he echoed the need for definitive Congressional action in the near future.

The hearing is a reminder for surface transportation suppliers that the future of one of their most significant clients is being actively discussed in the halls of Congress and that major change could await in the years ahead that may impact their business.

Key Takeaways

• The immediate insolvency threat (FY2027) has been forestalled. But relief from the Postal Service’s retirement contribution obligation only buys additional time rather than a permanent solution.
• A cash crisis remain a risk over the next few years, but a definitive crisis awaits the Postal Service in 2031 barring Congressional action.
• Defining, or redefining, the Universal Service Obligation (USO) is a necessary and viable path to a self-sustaining, durable Postal Service but could invite significant political interference with permanent consequences for postal transportation suppliers. Reduced delivery days and network contraction are possible consequences.

Postal Economics: What Every Transportation Supplier Needs to Know

Most surface transportation suppliers know the Postal Service as a client. Few understand the regulatory framework under which it operates. That gap in understanding is increasing problematic because it is the regulatory framework that is the focus of reform with potentially significant consequences for USPS transportation needs.

Two Products, Two Regulatory Regimes

Every piece of mail or package the Postal Service handles falls into one of two statutory categories, and the distinction shapes everything: pricing, cost recovery, regulatory oversight, and financial performance.

Market Dominant products — primarily First-Class Mail and Marketing Mail — are those for which the Postal Service holds significant market power effectively operating a government-authorized monopoly. Postal customers are, in the regulatory sense, captive: no private carrier can legally deliver a first-class letter to a U.S. mailbox. Because of that captive market (i.e., monopoly) the PRC regulates Market Dominant rates under a cap-based system tied to the Consumer Price Index, with additional above-CPI authority the Commission has granted since 2021. Market Dominant mail accounts for 94 percent of total volume, but only 58 percent of revenue as of FY2025, which is down from 73 percent a decade ago.

Competitive products — primarily parcels and packages — are those where the Postal Service competes with private industry, including UPS, FedEx, Amazon Logistics, and other eCommerce transportation solutions, such as regional carriers. Regulatory oversight is lighter: the PRC’s primary check is ensuring Competitive products cover their own attributable costs and are not cross-subsidized by Market Dominant ratepayers (i.e., mailers). Competitive volume grew 45 percent over the past decade and revenue grew 83 percent. But at lower margins per piece, and at only 6 percent of total volume, package growth cannot offset the precipitous decline in First-Class Mail contribution.

Attributable Costs, Institutional Costs, and Why the Math Is Getting Worse

The Postal Service’s cost accounting divides expenses into two buckets with direct implications for how transportation costs are treated and who ultimately bears them.

Attributable costs are tied directly to a specific product — the cost of transporting a particular letter from origin to destination. These are assigned to the product and recovered through its rates.

Institutional costs are the fixed costs of running the postal network that cannot be pinned to any single product: facilities, infrastructure, and the core transportation network that moves mail regardless of volume. In FY2025, institutional costs represented approximately 49 percent of total operating costs, which is up from 41 percent five years earlier. That 8-point shift is a direct consequence of volume decline. As fewer pieces move through a fixed network, the fixed cost per piece rises.

Each product’s “contribution to institutional cost” — the margin above its own attributable costs — is what funds the network. First-Class Mail has historically been the dominant contributor. When First-Class volume falls, the institutional cost burden shifts to remaining products or goes unmet. That is the core of the financial crisis.

A Decade of Losses: The Financial Record and What Comes Next

Vice Chairman Taub’s testimony provided an effective summary of the Postal Service’s longstanding financial struggles, which predate the Delivering for America plan and the tenure of Postmaster Generals DeJoy and Steiner.

Ten Years of Structural Decline

The numbers from FY2016 through FY2025 tell a straightforward, disconcerting story:

• Total revenue grew 15 percent. Operating expenses grew 20 percent.
• Nine consecutive years of net operating losses. Cumulative operating losses of approximately $20 billion over the decade.
• Mail volume fell 30 percent, from 154 billion pieces to 109 billion. Delivery points grew 11 percent. Pieces delivered per workhour fell 28 percent.
• Salaries and benefits — approximately 70 percent of operating expenses — grew 26 percent from $48 billion to $61 billion. The Postal Service’s controllable loss in FY2025 was $2.7 billion, which is the highest since the DFA plan began.

The rate increases the PRC has authorized have not closed the gap between expenses and revenue, and according to the PRC cannot. According to Commissioner Fisher’s testimony, achieving financial stability through rates alone would require approximately 50 percent increases, which would trigger an estimated 30 percent volume loss. Higher rates are projected to accelerate the structural decline they are intended to offset.

The Liquidity Picture and the Risk Timeline

Following the retirement fund contribution requirement relief provided by the PRC, Postmaster General Steiner’s forecast that the Postal Service would run out of cash within twelve months has been postponed. As of Q2 FY2026, the Postal Service held approximately $11.9 billion in combined cash and near-cash resources: $4.5 billion in unrestricted cash, $3.6 billion in current restricted cash, and $3.9 billion in noncurrent restricted cash. The PRC’s April 9, 2026 waiver — which allows the Postal Service to redirect approximately $2.4 billion in FY2026, and potentially more than $3 billion annually through FY2030 from mandatory retirement payments to operating expenditures — meaningfully extends the runway. 

Unfortunately, the amended forecast does not come with a guarantee. The waiver provides liquidity flexibility, but not structural repair. If the Postal Service does not exercise meaningful cost discipline, cash depletion before 2031 is a genuine risk. Controllable losses have not improved

The unequivocal deadline arrives in 2031. The Postal Service’s Retiree Health Benefits Fund is projected to be exhausted by then. When that occurs, annual premium payments currently drawn from the fund — estimated at approximately $6 billion per year—shift directly to operating revenue. That is a financial obligation and change to the Postal Service’s annual budget that it cannot absorb. Congressional action before 2031 is not optional. The question is when will Congress take action and whether reform is implemented in advance of the financial crisis.

Financial Risk TImeline

• FY2026–2027: Immediate crisis averted by PRC waiver ($2.4B in FY2026 relief). Combined cash resources approximately $11.9B.
• FY2028–2030: The risk zone. Waiver provides $3B+ per year in flexibility, but continued operating losses and capital demands could erode the capital cushion without a disciplined approach to costs.
• FY2031: A potential, unequivocal crisis. Retiree Health Benefits Fund projected to be exhausted. Annual premium payments of approximately $6 billion shift to operating revenue. This deadline does not move. There is no more retirement obligation relief available absent Congressional action.

Defining the USO: The Decision That Will Reshape the Network

The Commission’s central legislative ask is that Congress define the Universal Service Obligation (USO). This has been the Commission’s recommendation since its 2008 Report on the USO. Other stakeholders, including the GAO, OIG, and Postmaster General, have agreed.

Why the USO Has Never Been Defined and Why That Is Now a Problem”

Congress has mandated six-day delivery and established a general directive to provide postal services to all Americans. Beyond that, the USO has never been specified in statute. The result is that the Postal Service effectively defines its own obligations through operational decisions — changing service standards, closing facilities, modifying route structures — without specific legislative or even regulatory direction.

Defining the USO enables Congress to identify what level of postal service the country requires and how to pay for it, enabling the Postal Service to align its operations and network accordingly.

The Four Attributes That Define the Transportation Network

Taub identified seven attributes of universal service, four of which as the primary cost drivers. These four factors also influence the scope and structure of surface transportation contracting.

Geographic Scope. Geographic scope defines where universal postal services must be provided. The current framework imposes no specific geographic standard beyond a general mandate to serve all communities. A defined geographic scope could establish minimum coverage requirements, but it could equally authorize reductions in areas deemed uneconomical.

Range of Products. The Postal Service currently offers 46 products within the USO. A statutory product would rationalize this to a defined core, most likely single-piece letters and single-piece packages. Products excluded from the defined USO would face different funding treatment. If Competitive Product parcel delivery is treated as a commercial activity outside the USO, the financial case for maintaining the surface network that supports it changes materially.

Access. Access standards govern the density of Post Offices, collection boxes, and other network entry points. Reductions in collection point density directly affect logistics. A statutory access floor would constrain further unilateral contraction. The absence of one leaves contractors exposed to continued network consolidation driven by financial pressure rather than defined service obligations.

Delivery Frequency. This is the most consequential attribute for contracted transportation. The Postal Service is currently required by statute to deliver six days per week. Reducing that to five days has been discussed for over a decade. The Commission estimated the cost of six-day delivery at $3.4 billion per year in FY2024 — up from $2.2 billion in FY2019. The Postal Service has estimated five-day delivery would generate approximately $3 billion in annual savings. A significant portion of those savings would come from the transportation cost base: fewer delivery days mean fewer trips, fewer lane activations, and fewer contracted route-hours. 

How the Political Process Could Work

Defining the USO is not a technocratic exercise. Congress will balance competing interests: rural legislators, mailing industry associations, postal labor unions, consumer groups, commercial package shippers, and the Postal Service itself. Surface transportation contractors have historically been underrepresented in this conversation.

There are two possible pathways. The first is direct Congressional action: legislation defining the USO in statute. The second is a delegation model, in which Congress directs the PRC to define the USO by regulation under statutory criteria, analogous to the FCC’s universal service framework under the Telecommunications Act.

Conclusion

The Postal Service has been in a near constant state of change over the past five years. It appears that many years of change still lay ahead. Even if 2027 does not portend a financial crisis. Transportation suppliers should remain watchful as the future of the Postal Service is increasingly and decisively discussed by Congress and the Executive Branch.

For questions regarding the implications of postal reform for your contracts or business operations, contact Gregory A. Reed, Partner, Transportation & Logistics Practice, Hanson Bridgett LLP.